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Brexit Phase 2 : Time to Shape the Final Deal

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Brexit Phase 2 : Time to Shape the Final Deal FEBRUARY 2020 BREXIT PHASE 2 : TIME TO SHAPE THE FINAL DEAL On 31 January the UK (finally) formally left the EU. The ratification of the Withdrawal Agreement that Boris Johnson negotiated with the EU last October 2019 means little changed overnight: so far Britain has only made an “Institutional Brexit”, transforming the UK into an EU rules taker until the end of 2020. But with the UK Prime Minister adamant that he wants to conclude the next phase of negotiations on the future trading relationship by 31 December 2020, this leaves an unprecedentedly short period to avoid a cliff-edge ‘hard’ Brexit. As the phase 2 negotiations kick off, APCO’s team in London, Paris and Brussels examine the negotiating positions of the UK and EU, and the prospects for a deal. THE STRATEGIC SETTING – YVES BERTONCINI THE VIEW FROM LONDON Three key political changes must be considered by economic actors in this transition from “phase 1” to ‘Get Brexit Done’ was the rallying cry which propelled “phase 2” of the Brexit negotiations: Boris Johnson’s election victory. This year his overriding focus will be to ‘conclude’ Brexit with no extension, to exert 1 – Brexit phase 1 was a “divorce phase” whose topics maximum pressure on the EU27 to make concessions and (money, citizens and the Irish border) were somehow easy enable his Government to move on to domestic priorities. to identify (if not to fix). The negotiations wereled by lawyers and concluded by a quite general “political declaration”. The UK will approach phase 2 very differently from last In contrast, the phase 2 negotiations and outcomes are time. Back then, Prime Minister Theresa May and Olly much more open and will shed light on Member States’ Robbins, her chief negotiator, saw Brexit as a problem differences. They will be led and influenced by political that needed to be managed. The Cabinet and Whitehall and economic actors wishing to promote their interests were also split on the level of friction the UK was prepared in the design of the future EU-UK relations – it will be to tolerate at the border, reflecting wider divisions in an appropriate time to analyse decision makers’ positions Parliament and the country. and engage with them with a view to shaping the contours of the final trade agreement between the EU and the UK. Now Ministers accept that some friction will be necessary for Brexit to be worthwhile, and that trade will flow less 2 - Phase 1 of Brexit was managed by the Westminster freely than before. And thanks to the Government’s and Brussels “bubbles”, given the technical nature of large majority, this vision of Brexit will not face significant the divorce deal and need to have it ratified by two challenge in Parliament, unlike last time. parliaments only, in London and Brussels/Strasbourg (and of course the EU Council as well). In contrast, Brexit Despite some tough rhetoric from the Chancellor Sajid phase 2 negotiations cover a wide range of issues which Javid (since tempered at Davos), the UK is not planning are regulated at EU level (e.g. trade, fisheries) but also at to take a blanket approach to this. It plans to seek closer national level (e.g. transport, investment). The monitoring alignment in exchange for higher quality access to the and ratification of some elements of the coming UK-EU EU single market in some areas, and more divergence deals will therefore involve , under many more actors in others to provide maximum room for negotiating new the control and influence of national parliaments and trade deals with third countries. stakeholders. 3 - The timing and sequencing of Brexit phase 1 were Ahead of the expected abolition of the Department for quite long and (unexpectedly) flexible, with two years of Exiting the European Union at the coming reshuffle, scheduled negotiations followed by several extensions. a new ‘Taskforce Europe’ led by the Prime Minister’s chief negotiator David Frost has already been created By contrast, the timing of Brexit phase 2 appears to be extremely short and the sequencing unclear: if in Downing Street. An early task has been to assess the no further extension is requested by the UK side before trade-offs inherent in seeking more sovereignty on the the end of July 2020 (and they have firmly excluded one hand or minimising economic disruption on the other, it), the EU and the UK will have to conclude and ratify and presenting the Cabinet with options. global and specific deals on some issues by the end of 2020 (e.g. trade and fisheries) but also to postpone other Concrete decisions have yet to be taken, but overall the deals (transport?) to 2021 or beyond. The shaping of UK is looking to take a sector-by-sector approach, pinning this phase 2 sequencing is then another key challenge down basic foundations in certain critical areas by the end for business in both the UK and EU27, given potential of this year ahead of further more detailed agreements in impact of a poorly managed/cliff edge Brexit. the future. As far as possible, the UK wants to frame 2020’s talks as a Commission, and threatening a quicker deal with the USA. technical process, within the Commission’s competence, The EU view is that the Trump administration has not yet and therefore not requiring ratification by EU27 national proved a reliable negotiating partner for anyone, and it Parliaments. In addition to making the self-imposed is unlikely that the British will be the first exception. And 31 December deadline easier to meet, this should also how can the British, now that they are outside the system, further reduce levels of domestic political scrutiny and credibly tempt EU governments to break ranks? pressure around Brexit. The Commission will strive in any case to avert and However, the implications of the UK’s overall approach to fragmentation, by ensuring that member states are fully phase 2 are that any deal agreed this year will necessarily integrated into shaping and implementing the negotiating be more focussed on goods, where the EU enjoys a trade mandate. An Association Agreement would require surplus with the UK, than services where the reverse is the ratification by all EU member state parliaments; from the case. In other words, the future UK-EU relationship will Commission’s point of view, that is an important element be long way off the comprehensive free-trade agreement of maintaining trust, even if it comes with some political that Brexit supporters desire, at least initially, potentially risk (the EU’s agreements with Canada and Ukraine were stirring up future political trouble. delayed respectively by problems with the Walloon region of Belgium and the Netherlands). But while the UK appears to have a plan for managing phase 2 – or at least its first part - it’s (still) not yet clear Eyebrows have been raised in Brussels and Dublin at what substantively the UK wants to achieve from the British insistence that there will be no checks on goods negotiations. travelling between Northern Ireland and Great Britain under the terms of the Brexit deal. In fact there are already In that sense Brexit phase 2 is likely to look much like checks on the transport of live animals from Northern Brexit phase 1: a long, drawn-out and uncertain process, Ireland to England, Scotland and Wales. A plain reading requiring just as much risk-assessment, contingency of the text of the Withdrawal Agreement indicates that planning, and engagement as before. there will need to be administrative checks at ports on the eastern shore of the Irish Sea, and British suggestions to Burhan Al-Gailani the contrary are not helping to build trust. The EU remains sensitive to Boris Johnson’s 2016 assertion that “our policy is having our cake and eating THE VIEW FROM BRUSSELS it”. Continued free trade and market access will depend on the UK accepting a “level playing field”, in other Michel Barnier, who headed the EU’s negotiation team for words, not diverging from EU regulations and standards the first phase of the Brexit negotiations, remains in the for goods. Otherwise the UK could have access to the EU lead for the talks on the new trade relationship. There are single market while at the same time undercutting the a few other players on the Commission side as well – Philip EU’s standards. At the same time, the UK’s desire for Hogan, the Irishman now in charge of the trade portfolio, divergence is accepted; the point is that it comes at a cost. was an important influence during the initial negotiations and now formally has a key role; Barnier’s deputy from the Nicholas Whyte first stage, Sabine Weyand, is now Hogan’s chief official in her new job as Director-General. The EU has made it clear that it wants the future relationship to be an Association Agreement, the EU’s ABOUT APCO standard off-the-shelf model treaty with third countries such as Norway, Turkey and Canada, rather than the unsatisfactory patchwork of treaties where it has landed APCO Worldwide is a global communications consultancy. with Switzerland. Association Agreements can have a lot We help the most innovative organisations adapt and of flexibility for future development; if the UK wants to thrive in this fast-moving, interconnected and complex take a different approach, it will need to come up with its world. own proposal (which will be tested by the EU side against EU law). CONTACT US The EU is not especially happy about the abbreviated timescale proposed by the British.
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